Investors Slam Company for Not Disclosing Climate Risks to Its Coffee Business

Published: August 17, 2011

Two firms representing shareholders of J.M. Smucker Co. are demanding that the company clarify how climate change will affect the supply and price of coffee beans and, ultimately, how it will affect investors.

The company -- better known for producing Smucker's brand jams and syrups -- also owns the Folgers, Dunkin' Donuts, Millstone and Kava brands of coffee. It has stalled behind their competitors in assessing how climate change will affect its coffee supply chain, say sustainable investment firms Calvert Investment Management Inc. and Trillium Asset Management LLC.

The firms will introduce a resolution at the J.M. Smucker shareholder conference today, in hopes that investors will vote in favor of greater clarity.

"Because coffee accounts for 40 percent of [J.M. Smucker's] net sales and 48.6 percent of profit, and the coffee industry is particularly susceptible to climate change-related impacts, [the company] must provide a robust assessment of climate change risks to its coffee business supply chain," states a letter (pdf) sent to shareholders, urging them to vote yes on the resolution.

The resolution requests that the company's board of directors release a report describing J.M. Smucker's management of the social and environmental risks to the coffee supply chain within the next six months. More specifically, Trillium and Calvert -- which represent more than 400,000 investors -- ask that the board address the effects of temperature increases, erratic rainfall and corporate responsibility toward coffee growers and their families.

"Not having disclosure on this type of information was a red flag to us as investors," said Rebecca Henson, a sustainability analyst at Calvert, which owns more than 4,000 shares in the company. "Given how much their revenue is vulnerable, we felt a lot more needed to be done."

No beans about it

Coffee prices have nearly doubled in the past two years, according to figures provided by the London-based International Coffee Organization. Since May 2010, J.M. Smucker has increased its prices 34 percent, says the Calvert/Trillium letter, in order to keep ahead of the commodities market.

Coffee is one of the most sensitive crops to climate change and is grown in the most vulnerable regions, said Rodney North, a spokesman for Equal Exchange, which markets fair trade coffee. Increasing temperatures have driven farmers to plant at higher and higher altitudes. In Colombia, incessant rains have knocked off the coffee plants' flowers, disrupting the development of the coffee beans.

Climate change is turning coffee growers into the proverbial canaries in the coal mine, said North.

"Coffee farmers are bearing the brunt, and they're already seeing the effects," he added.

Strong call for action

Last year, the Securities and Exchange Commission ruled that publicly traded companies are required to to disclose the risks climate change will pose to their assets and supply chains.

Although a resolution is not legally binding, Henson believes it puts a spotlight on the company's choices.

"If there's a strong vote, it's an even stronger call for action," she said.

Humanitarian organization Oxfam America has vouched its support for the movement, saying that that corporate acceptance of climate change risks is vital to ensure coffee-growing communities are protected.

"Public disclosure of risks is the first step towards ensuring communities in Smucker's supply chain are adequately protected from impending climate risks such as floods, droughts and extreme weather events," wrote Heather Coleman, climate policy adviser for Oxfam, in a blog post. "It is critical that small-scale farmers gain access to adequate resources to prepare for and respond to these threats."